The future of the best beef in America may depend on a herd in East Texas

The lodge house where Gary Yamamoto lives sits atop a hill overlooking his sprawling East Texas ranch. The elegant yet rustic spread, which used to be a dude resort for gays and lesbians, features motel-like guest rooms and a restaurant-style dining room.

Yamamoto, an eccentric sixtysomething Japanese-American, is one of the most famous bass fishermen in the world. But that's not why I've come to visit him. I'm here because Yamamoto owns the second-largest, and arguably the most important, herd of Wagyu cattle in the United States.

Wagyu beef is having little or no effect on the average American's eating habits. Constituting an infinitesimal fraction of the beef market, it's barely a blip on the radar of the massive U.S. meat industry. But among high-rolling gourmets, American-raised Wagyu meat, or "American Kobe," has caused near-delirium. Steak houses can't get enough of the stuff, and producers are struggling to keep up with the demand.

Originally from Japan, Wagyu cattle produce the extremely high quality meat known popularly as Kobe beef. In Tokyo, Kobe steaks sell for up to $300 a pound. And in the last few years, American Kobe has become the hottest trend in the gourmet-meat industry. Houston steak lovers are paying $100 for an eight-ounce portion at local steak houses and up to $125 a pound on the Internet -- when they can get it.

And at the center of the Wagyu cattle frenzy is Gary Yamamoto. The Wagyu breed of cattle is all black and not very big. Typically, a Wagyu steer is several hundred pounds smaller than an Angus. They have a strange stance; their hind ends are higher than their shoulders.

After we tour his operation, Yamamoto invites me to dinner at the lodge, whose dining room is now called Beverly's Restaurant. There, Gary's half-Japanese wife, Beverly, arranges for the kitchen staff to prepare a dinner of Wagyu beef strip steaks. I sit down with the Yamamotos and their friends Joe Burleson and his wife, who do the marketing and accounting for Yama Custom Beef. Over cocktails, Yamamoto talks about his herd and how he got into the beef business.

About 15 years ago, one of Japan's foremost Wagyu breeders, Shogo Takeda, got permission from the Japanese government to take a limited number of Wagyu cattle to Australia and the United States. Because real estate is so expensive in Japan, he wanted to find a place where he could raise high-quality beef for the Japanese market at a lower cost. But Takeda's foreign-raised Kobe never caught on in Japan. So in 1998 he gave up on his dream, sold his American Wagyu cattle herd to Gary Yamamoto and moved back to Japan.

As Yamamoto continues the story, Beverly, who has the looks and poise of a former beauty pageant contestant, interrupts him. "Takeda had no son; he said Gary would be his son," she says, going on to brag about deals with grocery stores and other places that would soon sell Yama Beef.

Then he begins to talk excitedly about sperm. Yamamoto believes that he'll someday dominate the American Kobe market because he has the best bull semen in America. But what he doesn't want to tell me is that Yama Custom Beef has just lost its biggest customer and that his precious genetics may soon be lost along with the rest of herd.

When it comes to beef, marbling -- or intramuscular fat -- is the measure of quality. The marbling in Kobe beef exceeds anything else in the marketplace.

Earlier in our nation's history, extremely marbled USDA Prime was readily available. But in the last 20 years, in response to consumer preferences for lower fat, the beef industry has changed the way it feeds cattle in order to produce leaner beef, according to Molly Patterson, a spokesperson for the National Cattlemen's Beef Association. "As a result, the highest level of USDA Prime isn't even produced anymore," she said. "American beef is 27 percent leaner today than it was 20 years ago."

The USDA grades beef as Prime, Choice or Select. USDA Choice is roughly 15 percent more marbled than USDA Select, and Prime is about 15 percent more marbled than Choice. Beef from Wagyu cattle goes off the USDA scale. The highest-quality Kobe is around 20 percent more marbled than USDA Prime.

How is all this Wagyu marbling achieved? "Genetics and feeding, those are the two keys," says Beverly Yamamoto.

What she means is that the production of high-quality Kobe beef depends on both the cattle's genetic propensity to put on fat and an extensive and costly feeding regimen. While American cattle typically spend 90 days on a feedlot fattening before slaughter, Wagyu cattle spend a year or more developing their incredibly high levels of marbling.

When the meat industry started producing leaner beef, the drastic decline in quality left a vacuum at the top end. The disappearance of USDA Prime beef from grocery stores coincided with a meteoric rise in the number of high-dollar steak houses on the restaurant scene. Deprived of the highest-quality beef in the supermarket, the American gourmet consumer went looking for it elsewhere. Expensive steak houses that served USDA Prime thrived -- and then, in the last couple of years, along came Kobe.

During the holidays, Vic & Anthony's Steakhouse in downtown Houston is running a special on 12-ounce "Kobe" strip steaks. Each steak will sell for somewhere around $115, according to executive sous-chef Grant Hunter. "And that's a good deal," he says.

"The marbling melts in between the layers of meat, making it incredibly tender and extremely flavorful," says the chef. "Then there's the glamour of it. When you say, 'We have Kobe in the house tonight,' it creates excitement. We put them in the display case up front so you can see the incredible marbling when you walk in the front door. It's real eye candy."

Given the demand and the insane prices being paid for Wagyu, you'd think Gary Yamamoto would be in an enviable position -- but in fact, he has pissed off Allen Brothers, the Chicago premium-meat supplier that was once his main customer, and put his cattle herd in jeopardy. One problem, according to Allen Brothers president and owner Todd Hatoff, is that Gary Yamamoto spends little time raising his cattle. "He's off fishing most of the year," says Hatoff.

"Gary Yamamoto is the Magic Johnson of bass fishermen," says my fellow dining guest Joe Burleson. He hands me a trading card with Yamamoto's smiling face on the front. On the back are stats of Gary Yamamoto's top-ten finishes in major bass-fishing championships. In Japan, he's a famous sports figure.

Yamamoto made his fortune with another company: Yama Custom Baits. That company makes salt-impregnated plastic worms that fish evidently find irresistible. "I am the largest manufacturer of soft plastics in the world," says Yamamoto.

Yama Custom Baits once sold the majority of its fishing lures to anglers in Japan. But when the Japanese market peaked, Yamamoto decided to turn his attentions to the bass-crazy American South. He bought this ranch because of its proximity to Lake Fork, the granddaddy of Texas bass lakes, where 15 of the top 20 state-record largemouth bass have been reeled in.

The original idea was to turn the ranch into a fishing resort. But Yamamoto's accountant told him he should also get some livestock in order to cut his taxes with an agricultural exemption. A half-dozen cattle would have done the trick.

"But when I started looking into the cattle business," he says, "I found out that the Japanese were paying $10,000 for a good Wagyu carcass." If you're going to be in the cattle business, you might as well make money at it, he figured.

As it happened, Yamamoto had made friends with a man in the position to help him. "Gary had just lost his father. Takeda didn't have a son. They formed a bond. That's why he sold us his entire herd," says Beverly Yamamoto.

"Takeda brought 80 cows and ten bulls to the U.S.," she says. Although he never produced a herd large enough to sell much meat, Takeda sold Yamamoto a genetic gold mine. The best genetic strains of Wagyu cattle in this country come from the descendants of these full-bloods.

At dinner, Beverly's chef brings our Wagyu strip steaks to the table to see if they're done to our liking. The meat is cooked medium-rare, as requested. But I'm shocked by the flavor. It's terrible. The beef tastes bloody and metallic.

"Has this meat been aged?" I ask.

"No," Yamamoto says. "Have you seen beef dry-aging?" he asks with a look of disgust. "It smells rotten and it has mold all over it." It turns out Gary Yamamoto doesn't believe in aging beef. None of the meat Yama Custom Beef sells over the Internet or to restaurants has had any aging. Which explains why a box of expensive Yama Beef Wagyu steaks I sent to relatives as a birthday present didn't get rave reviews.

It also explains the symbiotic relationship between Yamamoto and his Chicago distributor. Allen Brothers buys quality meat from around the world and does its own wet and dry aging. "Gary Yamamoto is not a meat man," Todd Hatoff told me. And when it comes to aging, Allen Brothers is the best in the business.

As we eat our steaks, Yamamoto outlines his vision of a herd that can produce 50,000 head a year. "You have to be big enough to control the market," he says. "I still have high hopes." But he's running out of believers.

"We've been hearing the same thing for three and a half years," says Hatoff. "A lot of promises have been made."

Allen Brothers had a contract to buy all the top-end Wagyu meat Yama Custom Beef could supply. But recently the companies have parted ways. According to Hatoff, Yamamoto is no longer producing beef that meets Allen Brothers' specifications. Allen Brothers now gets its Wagyu beef from sources in Australia and elsewhere.

With people lining up to pay obscene amounts of money for this meat, how did Yamamoto manage to screw things up?

According to Hatoff, the Wagyu beef market took off faster than expected, leaving Yamamoto scrambling to fill orders. Cattle that should have spent 300 or 400 days on the feedlot to achieve their full marbling potential were there for less than 200. But worst of all, cattle that should have been held for breeding were being slaughtered.

"To meet demand, he was destroying the herd," says Hatoff.

With the Allen Brothers contract suspended, Gary Yamamoto isn't slaughtering many animals anymore. But now he's stuck on the horns of a cattle-raising dilemma. He needs to stop selling meat to build the herd as big as it needs to be. But if he stops selling meat, he'll run out of money. "I have my entire fortune invested in this stuff," he says. "People are saying I'm crazy."

He could sell some of his bulls or bull semen to raise cash, but then he wouldn't control the Takeda genetics anymore. Partnerships, satellite ranches and South American investors all have been discussed. So has the idea of selling the whole herd.

"I have the purest herd in the U.S., and I want to keep it intact," Yamamoto says with considerable emotion.

There are other Wagyu cattle in the United States. They are descendants of four Wagyu bulls that were smuggled out of Japan under mysterious circumstances in 1976. They eventually made their way to Georgetown, Texas, and a rancher named Don Lively who, along with his partners, made a fortune selling semen. In 1991 The Wall Street Journal reported that the bull semen that was sitting around in Lively's storage shed at the time was worth more than $2 million.

Buyers of Lively's Wagyu bull semen crossbred Angus and other breeds with the Wagyu. By then impregnating the crosses with Wagyu semen from one of the other bulls, it was possible to get three-quarter-Wagyu offspring, the minimum genetics required to achieve highly marbled meat.

But those four bulls are part of the reason there is so much lackluster Wagyu beef on the American market today. They were Wagyu, all right, but some have alleged they were genetically inferior. And since there were only four of them, the line was limited.

Chefs and waiters at expensive steak houses will swear to you that their Kobe steaks come direct from Japan. Maybe they're lying, or maybe they just don't know what they're talking about. On December 12, the United States and Japan ended a two-year reciprocal ban on beef imports. Although real Kobe beef soon will be available in the United States again, there hasn't been any in this country for more than two years.

Kobe is a city in Japan. Calling American-raised Wagyu beef "Kobe beef" is deceptive to begin with. And to make matters worse, much of what the American beef industry calls Kobe is plain ordinary beef with an inflated price tag. Some of it doesn't even meet the standards for USDA Prime. I've been burned buying Wagyu beef both on the Internet and in restaurants.

"You should always be skeptical about so-called Kobe beef," says Todd Hatoff. "Too many people are selling beef with minimal genetics and calling it Kobe."

But when full-blooded American Wagyu cattle are properly fed, they produce some of the best meat in the world. And when that meat is properly aged and properly cooked, it's something that every meat lover should experience at least once.

Unfortunately, the industry is a mess.

Will Yamamoto come up with a plan that will give the United States a steady stream of top-quality Wagyu beef? Will he sell his herd to somebody else who can?

The future of American Kobe is in Yamamoto's hands. According to Todd Hatoff, the Japanese will never allow any more Wagyu cattle or genetics to enter the United States. "The Japanese believe that the American Wagyu industry has bastardized their national treasure," Hatoff says.